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Business News/ News / India/  EU puts environment at centre of economic future
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EU puts environment at centre of economic future

The new order to be outlined by the EU in Brussels will centre on a goal to eliminate by mid-century the bloc’s net discharges of greenhouse gases

The ‘Green Deal’ will be presented by European Commission President Ursula von der Leyen. (Photo: Reuters)Premium
The ‘Green Deal’ will be presented by European Commission President Ursula von der Leyen. (Photo: Reuters)

BRUSSELS : Europe is set to stake its economic future on an environmental clean-up that will overhaul the way the world’s biggest single market polices businesses and manages trade relations.

The new order to be outlined by the European Union on Wednesday in Brussels will centre on a goal to eliminate by mid-century the bloc’s net discharges of greenhouse gases. Such pollutants cause the more frequent heatwaves, storms and floods tied to climate change.

Under the “Green Deal" being presented by European Commission President Ursula von der Leyen less than two weeks after she took office, the EU transition to climate neutrality would start next year and involve: stricter emission limits for industries from cars to chemicals; revamped energy taxes; new rules on subsidies for companies; greener farming; and a possible environmental import tax. Everything from finance to the design of cities would need to become more sustainable.

“The message is: Europe is prepared to put its money where its mouth is," said Peter Vis, a former top EU climate official who is now a senior adviser at Rud Pedersen Public Affairs in Brussels. “The commission is putting the green transition upfront as Europe’s new growth strategy. That is new. That is significant."

As it seeks to create an environmental profit motive for businesses across the board, the EU also aims to spur action worldwide and uphold the landmark Paris Agreement to fight global warming. The US has turned its back on the accord and other major emitters, including China, India and Japan, have so far failed to translate their Paris pledges into the necessary domestic actions.

“The commission is essentially proposing a complete transformation of the European economy, starting with a shift in policy priorities from growth toward sustainability," said Dimitris Valatsas, a London-based analyst at Greenmantle LLC, an advisory firm. “It’s hard to think of any European asset class that will not be affected by this."

While von der Leyen’s package will pave the way for months of lobbying and political fighting over a slew of underlying draft laws still in the works, the EU policymaking establishment is confident it has support on the street. Climate protection has risen on the EU agenda as people’s concerns about the risks of failing to act have grown, with 93% of Europeans regarding global warming as a serious problem.

For von der Leyen, the first woman to the lead the Brussels-based commission, the 28-nation EU’s executive arm, the Green Deal helped ensure she was approved for the job earlier this year by a fragmented European Parliament. The assembly’s political groups, which differ on everything from data protection to migration, largely united behind her environmental program.

Following a debt crisis that almost shattered the euro, a Middle East migration wave that rattled governments and a populist uprising that helped propel Brexit, the grand plan to green the economy may be seen as a way to “give new purpose and unity to the EU," Jonathan Gaventa at environmental think tank E3G wrote in a research note.

The first actual step on the road to net-zero emissions will be a proposal due in February to enshrine the 2050 climate-neutrality goal in European law and make it irreversible, according to an EU document seen by Bloomberg.

The climate neutrality target may get the political green light from EU government heads when they meet this Thursday and Friday in the Belgian capital. In a bid to avert a veto by a group of eastern European countries led by Poland, which relies on high-polluting coal for energy, the commission intends to propose a €100-billion ($111 billion) tool to help finance the economic transition in the most affected regions. Warsaw has estimated the shift would cost Poland more than €500 billion until 2050.

Legislative frenzy

The EU government heads have a political incentive on the global front to weigh in this week, when talks are wrapping up at a high-level United Nations climate conference in Madrid.

“An EU agreement on climate neutrality would encourage competition for ambition worldwide," said Isabella Alloisio, a researcher at the Florence School of Regulation, part of the European University Institute.

In the ensuing months, the Green Deal legislative frenzy will include a plan to tighten the EU emissions-reduction target for 2030 from the current 40% to 50% or even 55%, compared with 1990 levels.

Much more will follow in 2021, when draft laws are due to upgrade Europe’s goals for deriving energy from renewable sources and improving energy efficiency. That’s the timetable too for proposals to revise European energy taxation, widen the EU cap-and-trade market for pollution permits (covering power plants, factories and airlines) to include shipping, and reduce the number of free carbon-dioxide-emission allowances that carriers receive.

The year after next is also when the commission aims to propose an environmental import tax—one of the most controversial ideas. The so-called carbon border adjustment mechanism would seek to ensure that European manufacturers have a level playing field with competitors based in countries without emission curbs.

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Published: 11 Dec 2019, 09:36 PM IST
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